Connecticut hospitals are facing elevated expenses and sluggish revenue growth in the wake of COVID-19 and record inflation, an industry association reported Wednesday.  Three years on from the pandemic recession, the state’s hospitals continued to lose money, with an average operating margin of -0.5% in 2023, the Connecticut Hospital Association reported. That marked a slight improvement over the prior year, but lagged regional and national benchmarks — and remains well below profits the year before the pandemic, when revenues outpaced expenses by 4.6% “These are real and persistent concerns for the sustainability of Connecticut hospitals, the more than 260,000 jobs that they support and the high level care that they provide to patients,” said Jennifer Jackson, the association’s CEO, during a virtual press conference Wednesday morning. The report was conducted by Kaufman Hall, a national health care management consultancy.  Overall, hospital operating expenses — the cost of daily operations — grew by 6.5% percent, outpacing regional and national rates, particularly in the area of labor expenses. According to the report, Connecticut hospitals rely more on contract labor than peers in the industry, and have been much slower to reduce their dependence on it. Authors attributed the trend to a workforce shortage. Eric Swanson, a senior vice president with Kaufman Hall, said Connecticut’s above-average reliance on contract labor could be a result of the state’s higher cost of living and smaller size. Payer woes Hospital executives pointed to health insurer practices and the low reimbursement rates paid by Medicaid and Medicare as top drivers of their economic woes. Dan DeBarba, chief financial officer at Nuvance Health, said commercial insurer tactics lead to delays in timely care, health care worker burnout and increased administrative costs. “The commercial payer practices have become very, very challenging. In essence, payers do nearly anything they can within reason to not pay us,” he said, referring to practices like prior authorization and administrative hurdles.  In response to a request for comment, executive director of the CT Association of Health Plans, Susan Halpin, said the entire system needs to work together to reduce health care costs. “We understand that workforce challenges are real and that low reimbursement under Medicaid puts enormous pressure on the system,” Halpin said in comments sent via text message. “With the cost of health care continuing to escalate, particularly in the area of hospital services as reported by OHS, we all need to work together to address deficiencies in the system,” Halpin wrote. In a report published earlier this year, the Office of Health Strategy found that in 2021, hospital inpatient prices in Hartford, New Haven and Bridgeport were higher than the national median by 27%, 42% and 43%, respectively. By comparison, Boston and Providence had prices 10% and 9% higher than the national median.  The same report also noted that health insurance premiums are rising faster than incomes. Rep. Cristin McCarthy Vahey, D-Fairfield, who co-chairs the Public Health Committee, said she’s interested in seeing government, insurers and health care providers come to the table to address affordability. “Finger-pointing doesn’t solve problems,” she said. “In the end, every part of the system is going to have to both look within and be willing to reach across the divide to help come up with solutions,” McCarthy Vahey said. But the hospital executives said their top financial concern is what they see as underpayment by the government, and they stressed the importance of addressing Medicaid reimbursement rates this coming session.  According to the CHA analysis, caring for patients on Medicare and Medicaid cost the state’s hospitals more than $2.7 billion because of underpayments.  Medicaid reimbursement rates establish how much the state pays providers to treat low-income patients. In 2007, Connecticut set the Medicaid reimbursement rates for most physician services at 57.5% of the Medicare rate at the time. The rates have not been broadly adjusted since, though certain providers, including primary care physicians and OBGYNs, have received rate increases.  Last year, the state invested $7 million in funding from the American Rescue Plan Act to increase rates, but providers and legislators overwhelmingly agree more is needed. The second of a two-part Medicaid reimbursement rate study is due in January 2025, after which point Gov. Ned Lamont said his administration will consider whether some rates should be increased.  Hospital closure concerns Sens. Saud Anwar, D-South Windsor, co-chair of the Public Health Committee, and Matt Lesser, D-Middletown, co-chair of the Human Services Committee, both said the report resurfaced worries they have about potential hospital closures. Anwar said he’s specifically concerned about the viability of Waterbury, Manchester Memorial and Rockville Hospitals — the three Connecticut hospitals owned by Prospect Medical Holdings — as well as Day Kimball in Putnam and Bristol Hospital, which are independent. “We cannot close hospitals. We will have to use tax dollars to keep them going and manage them and, and that is not an efficient way of doing business. Prevention and support is a better way of taking care of the responsibilities we have,” said Anwar.  Lesser agreed and said he’s also interested in ensuring independent hospitals don’t get gobbled up by larger health care systems, “just making sure … they’re viable as independent,” said Lesser. “When you have consolidation, it means we all wind up paying more,” he said. During the press conference, executives touched briefly on the issue of hospital closures, though did not specify any facilities that were at particular risk. “We just need to be paid appropriately. Otherwise, I think it puts the whole system at risk,” DeBarba said.